Why has the oil & gas price control become essential for the introduction of conscious consumption? Could this stop the arms race?

Why is it important to stop Putin’s war against Ukraine by imposing economic sanctions on Russia? Because if the outcome of this war is determined by tanks and missiles only, it will prove to everyone that we urgently need to arm ourselves. A military solution only is bound to escalate arms race in the worldfor decades to come. Those who tried reducing military expenditures will no longer be doing it and those who gave up the last penny will be forced to go even further. If the sanctions due to the war are not a serious threat, this can free the hands of those who have the desire and money to start the new wars. The sooner the sanctions become effective; the less money will be spent on weapons in the future.

Why don’t the EU and other countries impose an absolute embargo on Russian oil and gas? Its introduction will increase transport prices as well as the cost of almost all goods. The volume of exported goods from the countries that did not join the sanctions – China for example, will increase even further driving out European competitors and displacing their products on the market.

What are the challenges of a partial embargo and import restrictions on Russian oil and gas?

With the stocks running down, oil and gas prices rise sky high. According to 2020 financial data, despite of COVID period, the weighted average profitability of Russian top-100 oil&gas producers was 19%; in 2019 and 2018 this figure reached 33% and 39% respectively. As a result of the imposed restrictions, export volumes decrease had to be compensated by a significant increase of oil and gas prices leading to higher profits for Russian companies. This allowed the country to continue spending money on propaganda and intermediaries who facilitate backdoor spending.

What does it take to ensure that the countries and companies that depend on Russian oil and gas supply do not indirectly participate in funding the Russian government’s war against Ukraine? The price of oil sold by a country subjected to international sanctions cannot be the same as of the oil supplied by other producers. An additional tax on the increased price when importing oil and gas from Russia may partially solve this problem. The higher the price of Russian oil or gas is compared to the 5-y average values, the higher should be the tax rate. Tax revenues can be subsequently used to subsidize the most vulnerable businesses and companies affected by the war. Oil and gas produced outside of Russia will become more attractive to buyers being free of the additional taxation. This can work as an incentive for the industry to increase production.

What does conscious consumption stand for? This is a sound approach to procurement in its broad sense; it has to do with ethics and responsibility, with environmental friendliness. This is an opportunity to choose, to make a decision at the time of a purchase based on values wider and higher than superficial goals. The more buyers of Russian oil and gas impose additional taxes on the increased price, the greater the share of loss in the value chain will be absorbed by Russian producers, and not by individual buyers.

How can this additional tax on the increased oil and gas price be used in the future?

Energy market prices tend to follow a number of patterns determined amongst others by restrictions imposed on some producers (Iran, Iraq, Russia), while the rest profit from price swings. Ideally, the surplus profit should be invested in infrastructure or green technology and social responsibility projects. If this isn’t the case, excess earnings may be used to finance warfare and propagandamachine, passing off temporary enrichment for permanent wealthprovided by the state, fuelling the illusion of the nation’s uniqueness.

An increased price through an additional tax can stimulate not only buyers but also producers to invest in alternative and renewable energy sources. At the same time, as a result of a decrease in production, natural reserves will not vanish. The next generations will be grateful for these measures that raise awareness and let people reflect on their deeds.

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